Bank of Japan does not rule out further rate cuts
Masayoshi Amamiya, Deputy Governor of the Bank of Japan, said that his department could further reduce the negative rate if it is needed to stimulate the economy. Will the USD/JPY quotations grow?
Such a move indicates the weakening of the yen against the US dollar. The rate of the Bank of Japan is now -0.1% with annual inflation + 0.7%. At the same time, the target inflation rate is much higher and amounts to + 2%. Japan's GDP growth in the 1st quarter of 2019 was + 2.2% in annual terms. The Bank of Japan strives to keep it at this high level and expresses its readiness for an additional rate cut, if necessary. Such a monetary policy may contribute to the weakening of the yen. The US dollar index rose significantly due to the publication of good data on the US labor market in June. The number of new jobs (Nonfarm payrolls) exceeded forecasts and turned out to be the maximum in 5 months. The Fed rate is now 2.5%. According to all forecasts, it will be reduced by 0.25% at the next meeting on July 31.
On the daily timeframe, USD/JPY: D1 came out of the downtrend. Various technical analysis indicators have generated uptrend signals. Further growth of quotes is possible in case of publication of negative macroeconomic data in Japan and positive in the United States.
- The Parabolic indicator indicates uptrend signal.
- The Bolinger bands® narrowed, indicating volatility decrease . The bottom line of Bollinger has a slope up.
- The RSI indicatoris above the 50 mark. It formed a weak divergence to the rise.
- The MACD indicator gives bullish signal.
The bullish momentum may develop if USD/JPY exceeds the last 3 upper fractals: 108.8. This level can be used as an entry point. This level can be used as an entry point. The initial stop loss can be placed below the signal of the Parabolic, the lower fractal and the lower Bollinger line: 106.7. After placing the pending order, the stop loss shall be moved following the signals of Bollinger and Parabolic to the next fractal minimum. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place a stop loss moving it in the direction of the trade. If the price meets the stop level (106,7) without reaching the order (108,8), we recommend to cancel the order: the market sustains internal changes that were not taken into account.
Technical Analysis Summary
| Position | Buy |
| Buy stop | Above 108,8 |
| Stop loss | Below 106,7 |
Dollar strengthened on strong June jobs report
US stock market pulled back on Friday as strong jobs report dampened Fed rate cut expectations. The S&P 500 slid 0.2% to 2990.41, rebounding 1.7% for the week. Dow Jones industrial lost 0.2% to 26922.12. The Nasdaq slipped 0.1% to 8161.79. The dollar strengthened after report US economy created above-expected 224,000 new jobs in June, after 75,000 jobs created in May. The live dollar index data show the ICE (NYSE:ICE) US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, jumped 0.5% to 97.22 but is lower currently. Stock index futures point to lower market openings today
FTSE 100 Leads European Indexes Retreat
European stocks snapped six-session winning streak on Friday. The EUR/USD joined GBP/USD’s continued slide with euro higher currently while Pound lower still. The Stoxx Europe 600 Index lost 0.7% Friday. The DAX 30 slid 0.5% to 12568.53 weighed by steeper than expected fall in German industrial orders in May. France’s CAC 40 slumped 0.5% and UK’s FTSE 100 fell 0.7% to 7553.14.
Shanghai Composite leads Asian indexes losses
Asian stock indices are all in red today. Nikkei lost 1% to 21534.35 with yen resuming its climb against the dollar. China’s markets are falling: the Shanghai Composite Index is down 2.6% and Hong Kong’s Hang Seng Index is 1.7% lower. Australia’s All Ordinaries Index turned 1.7% lower as the Australian dollar reversed its slide against the greenback.
Brent Advances
Brent futures prices are edging higher today. Prices rose on Friday: Brent for September settlement ended 1.5% higher at $64.23 a barrel Friday, declining 0.8% for the week.